the key saas metrics that matter to smb owners

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015

Top SaaS MetricsThat Matter to SMB Owners

LIGHTER CAPITAL WEBINAR © COPYRIGHT 2015 p2

Branden HarperDirector of Lighter Capital

+10 years financing early stage tech companies, either

as an entrepreneur or investor. Over $50M raised or invested

Today’s Speakers

David RyanFounder of SaaSOptics

A serial early-stage entrepreneur with 20+ years of experience. Built 8 companies

that span the spectrum of enterprise and SaaS.


› Founded in 2009

› 150+ SaaS customers

› $880 MM in TTM revenue

Trusted by:

About SaaSOptics


› Mission: make fundraising process more efficient utilizing technology and alternative structures

› Funded +80 tech companies: Most active revenue-based finance lender in the country

› $50K-$1M in growth capital, including making key hires, product development and sales/marketing initiatives

› Entrepreneur-aligned structure

About Lighter Capital


Today’s Agenda

Why track subscription metrics?

The 5 Principles of SaaS Analytics

Key metrics you should focus on and how they apply towards different business models and stages

p5


Subscription Metrics & Terminology

The Big 5MRR

Family(MRR. CMRR,

ARR/ACV)

Churn CAC

Cohorts CLV


Why Subscription Metrics?

Reason 1: Traditional financial reports don’t tell the whole story

Reason 2: For better operating decisions:

Income Statement

Balance Sheet

GAAP

MRR

CLV

Metrics Pricing Packaging

DevelopmentCompensatio

n


The 5 Principles SaaS Analytics

1. There are no rules

2. You make the rules

3. You must speak “subscription metrics” to speak with the capital markets

4. Analyze by segmentation

5. Know your subscription business model


Which Model Are You

B2C

High Transaction Volume

Low Transaction Price

Unassisted Buying

Click Acceptance

Monthly Credit Card Payments

B2B

Low Transaction Volume

High Transaction Price

Selling

Negotiated Agreement

Checks/ACH/Wires


Where are you?

Self-Funded

Angel Investors

Series A

Series B

Series C


#1 - MRR‣ MRR= Monthly Recurring Revenue

‣ But, MRR is not “revenue.” It is a “normalized approximation” of revenue

‣ MRR figures into almost all subscription metrics and analysis, so you must track it granularly and accurately!

‣ Know the elements of your MRR


MRR Variants‣ CMRR= Committed Monthly Recurring Revenue

‣ Use when this is a gap between contract execution and subscription start date

‣ B2B Only

‣ ARR= Annual Recurring Revenue and = 12x MRR

‣ B2B Only


#2 Churn‣ Churn = what is lost

‣ Customers lost

‣ MRR/ARR lost

‣ Reported in whole numbers

‣ Reported in ratios

‣ Speaks to sustainability and company valuation


Customer Churn & MRR Drive Valuations!

‣ Average Customer Lifetime Value = Average MRR X Gross Margin / Customer Churn Rate + Monthly Discount Rate

‣ Total Lifetime Value = Average Customer Lifetime Value x Customer Count End of Period


#3 Cohort‣ A Cohort is a “like group”

‣ Cohort analysis provides a sense of relative performance across different groups

‣ In subscriptions, the cohort is usually the month the customer was acquired, but a cohort can be any meaningful group

‣ Industry can be a cohort!


#4 Customer Lifetime Value (CLV)‣ Customer Lifetime Value is the estimated value of your existing Customer

subscriptions.

‣ Average Customer Lifetime Value = (Average MRR X Gross Margin)/(Customer Churn Rate + Monthly Discount) Rate)

‣ Total Lifetime Value = Average Customer Lifetime Value X Customer Count End of Period

‣ Grows in importance as your business matures

#5 Customer Acquisition Cost (CAC)‣ CAC = Cost of Acquiring a Customer

‣ Works hand-in-hand with CLV

‣ Grows in importance as your business matures


Which Metrics Are Important When?

Self-Funded

Angel Investors

Series A

Series B

Series C

Cohort, CAC, CLV

MRR, Churn

B2B


Which Metrics Are Important When?

Self-Funded

Angel Investors

Series A

Series B

Series C

Cohort, CAC, CLV

MRR, Churn

B2C


How Can We Help?

Lighter CapitalProvides $50K-$1M growth funding to SaaS companies

› Non dilutive

› Long-term growth capital

› Flexible payments

› Can get you funded in 30 days

SaaSOpticsComplete B2B Subscription Management Software

› Subscription Invoicing

› Revenue recognition and deferred revenue

› Subscription Analytics

› Subscription Management

Learn more: www.lightercapital.com

Contact us: [email protected]

Learn more: www.saasoptics.com

Contact us: 678.710.8260

http://www.lightercapital.com/

http://www.lightercapital.com/

the key saas metrics that matter to smb owners

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